I have read in many places that you must follow a route in investment that seems comfortable to you or does not cause any discomfort. This has seemed a rather strange way of going about things. As a practitioner of change management, where I advise organizations on transforming them into a different and improved state, I know for a certainty that any growth is always accompanied by change which is bound to cause discomfort.
The easiest thing in the world is to maintain status quo. You are used to doing something and if you just continue to do the same then you should be fine and it will not cause any discomfort. However, this mindset also impedes growth as you are unlikely to grow without changing anything. The classic definition of the term insanity is, “Doing the same thing in exactly the same way and expecting completely different results.”
So in the Financial planning or investment context, learning and creating a plan on the basis of it is good. Having the discipline to commit to the plan, execute it well and monitor it periodically is better. But the best by far is to keep learning and change things if it makes sense, even if it means that the change will cause a certain amount of discomfort. Let me give you some examples from my financial life where I made changes:-
- While I had some investments in stocks through IPO, I started buying from the secondary market only in 2004. The volatility was a serious impediment mentally, to start with, but I got used to it.
- Despite being comfortable with my stock portfolio, I realized after the 2008 crash that there would be some value in regular investment in MF. I started this and kept at it in a disciplined manner for 7 years. As someone used to a stock portfolio, I did find this mode of investment fairly staid, but the discomfort here was minimal.
- When I wanted to give up my corporate role, a lot of my portfolio was in equity except for PPF. For a 3 year period between 2012 and 2014, I invested much of my newly available money into debt instruments such as FMP, Tax free bonds, other Debt MF with the objective of creating a base for tax free passive income. This was clearly not comfortable as I could see myself missing out on a lot of equity investment opportunities, that I would have otherwise taken.
- Finally my shifting from SIP mode of MF investments about which I have written extensively in the blog.
What are some of the changes that you may want to make in 2016 even if it causes you a certain level of discomfort? Well, while the specifics will always depend on the individual and his context, here are some of the changes that may apply to a large number of investors.
- If you are not into equity at all, make a start. You can start with a small investment in a Balanced fund, if you are really worried about your risks but do it now.
- Open a PPF account if you do not have one already.
- If you are having a MF portfolio and are investing through SIP then look into the possibility of buying MF units at appropriate times, it will clearly benefit you more.
- Start creating a stock portfolio if you do not have one today.
- Examine each opportunity by it’s merit. Remember the tax free bonds being derided by some experts in 2013 are now the best return instrument of the market in 2015.
- Close all FD unless it is for the very short term of less than 1 year.
- Pre-pay your home loan as much as you can. Do not listen to arguments linked to tax savings, they are clearly wrong.
The point is we all evolve as persons in terms of knowledge, skills and expertise which is driven by new learning. Also, new learning will come only when you make an effort. Keeping a closed mind, just because you have heard some so called experts say so is a poor substitute to figuring out things on your own.
So in 2016, learn more, try out new things and embrace discomfort. That is the only way to grow, not only in financial management or investment but in all aspects of life.